LEGO Puts the RFID Pieces Together

By integrating RFID into its current shipping operations, the company not only is able to comply with mandates from Target and Wal-Mart, it is also saving money and labor compared with a standalone tagging system.

Acsis was able to roll out most aspects of the deployment without a hitch, allowing the RFID-related processes to run in parallel with existing steps. One area where this required extra work, however, was in the printing process. When the LEGO pickers go to the shelves to pull cases, the labels they carry are printed so that the first label correlates with the case closest to the end of the row of shelves from which they pick. The next label goes to the next-closest case, and so on. Before sending the print orders to the non-RFID printers, the PkMS program divvies up the print orders to ensure that the labels print out of the correct printer (each printer is correlated with a picking zone in the warehouse) and in the proper sequence. In order to send print orders to the RFID-enabled labels in this same manner, so that the pickers could also pick in sequence and from a particular zone, Acsis created a customized printer utility that runs on a separate server.

While LEGO has managed to integrate its RFID tagging requirements into its general operations for the orders requiring pickers to pull individual cases to build up pallets, orders for full and half pallets do disrupt operations. That's because in order to comply with the retailer's mandates that each case on a pallet have an RFID tag, workers need to depalletize them, generate RFID smart labels for each case, apply the labels, repalletize them and then generate a pallet label. If and when LEGO starts integrating RFID tags into its packaging, this step won't be necessary, but for now, it is.

So far, LEGO has shipped 26,000 RFID-labeled cases to the Tyler and Sanger DCs. McGrath says LEGO will also tag shipments to two more Wal-Mart DCs by the end of the year. That's fine by them, they say, because being instantly scalable was a cornerstone of their approach. Since it already tags all SKUs in each order bound for the RFID-enabled DCs, the company can easily add more RFID shipments by merely setting the ERP to flag more DC shipping addresses (or "ship-tos") that require shipments with RFID.

Currently, LEGO is using RFID labels with UPM Raflatac's Rafsec UHF Gen 1 inlays converted by The Kennedy Group. McGrath says he expects to test and migrate to Gen 2 inlays by the end of the summer. "Right now, we ship 10 million cases each year from the Enfield facility," he adds, noting that relatively few shipments are tagged. If the facility suddenly had to tag millions of shipments next year, it would be able to do so without making any adjustments to its system.

Of course, LEGO would have to shell out more for RFID labels. Until it begins integrating tags into its case packaging so it can receive them into inventory by reading tags rather than bar codes—which McGrath says isn't likely to happen within the next five years—LEGO doesn't expect many internal benefits within the DC from the new RFID tagging system. Right now, however, it is hopeful that increased visibility based on RFID reads of the tags at the retailer's facilities will lead to important near-term benefits.

"One of the huge benefits that the [LEGO] sales department is interested in is in tracking promotions," says Deets. By analyzing the read points of tagged cases within the RFID-enabled Wal-Mart and Target stores and comparing them with sales data, LEGO can determine if the orders they ship to the retailers during product promotions are being put out on the floor and replenished in a timely enough manner to fulfill demand.

LEGO hopes RFID will also provide a more accurate window into the retailers' distribution and receiving systems. "Sometimes, we'll see that a particular store sold 250 of an item of which we sent only 200. So sometimes the retailer distributes the shipments incorrectly," says Deets. "Start to finish, [RFID] can help resolve those kinds of questions."